The Senate passed their version of the tax bill late Friday night. If you missed the details of the bill, below are some of the major differences with the House bill that passed last month.

(And if you missed the update on the House Tax Bill Proposal, click here to read that one first.)
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House Proposal

Senate Proposal

Brackets

4

7

Top Individual Rate

39.6%

38.5%

Corporate Rate & Start Date

20%, in 2018

20%, in 2019

Alternative Minimum Tax

Repeals

Retains

Flow-through Income

Max 25% rate

23% Deduction

Medical Expense Deduction

Eliminates

Preserves Temporarily

Student Loan Interest

Eliminates

Preserves

Obamacare

No Changes

Individual Mandate Repeal

The main things that stand out to me with the Senate bill is the different treatment of flow through businesses (think S-Corps and partnerships), the retention of the AMT, and the addition of Obamacare mandate repeal.

We'll see what actually comes out of the House and Senate reconciliation process before we dig too deep into the details but, as others have said, this bill is more about tax cuts than tax reform and very different from the last tax reform bill delivered by the Reagan administration in 1986.

There are some very good things in the bill(s), and some simplifications, but overall this is written to be a major tax cut (especially to corporate rates) and written, first and foremost, in an attempt to drive the economy forward.

The administration would like to have a bill signed by Christmas, and at this point it's hard to see a way the GOP won't come up with some agreement between the two bills.

Please feel free to reach out if you have any specific questions or concerns about how the final bill may relate to your personal tax situation.
​This is general information and a brief summarization of complicated tax issues which are often subject to many exclusions and limitations. We make every effort to verify the accuracy of all information but we do not guarantee or warranty advice disseminated over the internet. Please give us a call to discuss potential strategies and ensure they make sense for your specific situation.

In the current version of the proposed bill, there are major points that, as usual, some will love, and some will hate. The bill originated in the House of Representatives and it’s just the first draft. It is important to remember that the proposed legislation will be sent to committee for debate as they consider changes and revision. House members are confident that their version will be revised and pass fairly quickly. The Senate will then need to write their own version of the bill. It is expected that the Senate bill will be similar to the version in the House, but may experience more difficulty getting passed. If both the House and Senate pass their versions of the bill, they will work together to reconcile the bill before final passage into law.

That said, let’s review some of the major points of the current House bill:

* Individual tax brackets go from 7 to 4

* The Standard Deduction is nearly doubled, BUT

* Personal Exemptions are ELIMINATED. This offsets some of the advantage of the increased standard deduction, BUT

* Pass through (think S-Corps and Partnerships) tax rates are REDUCED on SOME shareholders – (This one is a partial reduction for some shareholders in certain industries. It is likely to change significantly before passage.)

* Potentially Retroactive - (There have been calls for making the bill retroactive to 01/01/17 but recent remarks by the administration make this seem unlikely.)

These are highlights of a 400+ page bill and it’s obviously not intended to be a full review. Expect major changes if it becomes law. We’ll keep an eye on the bill as it works its way through Congress.

Please feel free to reach out if you have any specific questions or concerns about how the bill may relate to your personal tax situation.This is general information and a brief summarization of complicated tax issues which are often subject to many exclusions and limitations. We make every effort to verify the accuracy of all information but we do not guarantee or warranty advice disseminated over the internet. Please give us a call to discuss potential strategies and ensure they make sense for your specific situation.

2017 is rapidly approaching and that means the 2016 tax return filing season is right around the corner as well. If you are unsure about your 2016 tax liability, are interested in year end tax savings strategies, or would like a 2016 tax projection completed, please give us a call today. Many potential tax savings actions are only effective if they are initiated prior to December 31st. Call today!